Attempting to avoid consumer views that it is only a bike/cardo company, Peloton launched a rebranding effort in May 2023; however, in its latest earnings call, the company’s executives acknowledged that its expanded offerings and new identity have yet to click with customers.
Interim Co-CEO Karen Boone addressed the issue in a recent fourth-quarter earnings call, stating, “I’d say there are still a lot of people who think about us as a bike and/or cardio company. We have 16 modalities, but not everyone knows all the modalities we have. We’re really excited about Tread and Running, but also the content, the experiences, and run clubs and social features that we’re thinking about. We’re really bullish on strength. There’s so much of a movement toward strength. I think people understand the science behind it and why it’s important. It is the No. 2 modality for us, but I still think there’s a lot of people who come for the cardio and then understand the strength.”
Peloton’s Rebranding Challenges and New Identity
Rebranding efforts have focused on shifting Peloton’s niche image from an in-home bike company to a comprehensive fitness provider. They have also introduced new app membership tiers that include a free option with over 50 classes, an App One tier at $12.99 per month for extensive access, and an App+ tier at $24 per month for full library access and exclusive content.
Boone stated to investors, “We’re not yet known for strength. I think you’ll see with the beta tests we’re having, with other things we’re planning to make sure that’s better understood and more well known. I think you’ll see that as more of a white space for us in the future with new members and even kind of going deeper with our existing members. And then, I think there’s more we can do just with broadening beyond just fitness over time.”
Based in New York City, the exercise equipment and media company specializes in products that include stationary bikes, treadmills, and indoor rowers equipped with internet-connected touch screens that enable live streaming of on-demand fitness classes.
Subscription and Pricing Strategies Amidst Declining Numbers
Fourth-quarter earnings showed that Peloton’s paid connected fitness subscriptions fell by 75,000 to 2.98 million despite growth from retail channels. Paid app subscriptions also showed a significant drop, falling by 59,000.
While company officials are “looking at all of the pricing across the business,” Boone said, “there are no plans right now to increase our subscription price. On the hardware pricing front, it’s easier to think about what we might do in certain markets, especially where the penetration of third parties such as international is more significant. There are certain markets where we’re entirely third-party distributors.”
“And so, the margins there need to be a little bit higher to support those,” Boone added. “Looking at the unit economics across all products and across all channels, right now, the subscription margins are quite good… It doesn’t mean that we won’t ever entertain a subscription price increase, but it’s not something that we’re planning for any time in the immediate future.”
Other Interim Co-CEO Chris Bruzzo agreed with Boone’s take on brand perception during the fourth-quarter earnings call.
“We’ve got to change that perception that it’s only about the bike, that it’s actually also about strength,” he said. “In fact, strength is our second most popular way of exercising with Peloton. It’s also about running, and we’re doing some very cool stuff around Pace Targets and running content. We’re very excited about those things, and we think they create lots of white space for Peloton, but it will take time to develop.”
